Undertaking in Connection with the Reimbursement Scheme Regulations Made Under Paragraph

UNDERTAKING IN CONNECTION WITH THE REIMBURSEMENT SCHEME REGULATIONS MADE UNDER PARAGRAPH 3 OF SCHEDULE 5 TO THE FINANCE ACT 1997

Notes for claimants on the reimbursement scheme

The reimbursement scheme

The reimbursement scheme (the “scheme”) only applies where you accept that by receiving a refund of sums overpaid as IPT your business would be unjustly enriched at your customers’ (the final consumers’) expense. This is because your customers had, for practical purposes, paid the IPT charged in error and by not passing the refund back to them your business would benefit as a result.

In such cases a refund of overpaid IPT will only be made if you agree to reimburse those customers in accordance with the terms of the “scheme”.

Who can use the scheme?

The scheme can be used by all insurers or taxable intermediaries currently registered for IPT who wish to refund to their past customers (usually the insured or the policy holder) any money they overpaid as IPT. The scheme can also be used by those insurers or taxable intermediaries who are no longer registered for IPT; they are subject to the same terms and conditions as those who are registered for IPT.

When the scheme does not apply

The existence of the scheme does not affect your right to claim that you would not be unjustly enriched by the refund. Should we reject your claim on the grounds of unjust enrichment, you may ask Customs to review this decision and, if you remain dissatisfied, you have the right of appeal to the VAT and Duties Tribunal. If the Tribunal finds in Customs’ favour, the option will still be available for you to use the scheme, should you so choose.

The scheme can also apply to part of a claim. In certain cases you may not have passed the cost of all the IPT charged in error on to your customers, because for commercial reasons you chose to absorb some of it. For example, you could submit a refund claim for £50,000, and agree that £30,000 was passed on to your customers, but ask to be allowed to keep £20,000 because you absorbed that amount from your profits. In such circumstances only £30,000 would be subject to the scheme. The £20,000 claim would be considered separately by us on its merits.

The scheme’s conditions

A refund under the scheme will only be made to you if you agree to the following:

(i)Sign an undertaking in the format attached. Once signed it cannot be amended.

(ii)All refunds must be made to customers within 90 days.

(iii)Any residual amounts not returned to your customers after 90 days must be repaid to us within 14 days from the end of this (90 days) period. No reminders will be sent. If you fail to do this we will assess for the residue.

(iv)Any statutory interest paid with the refund must also be passed to customers and is subject to the same terms and conditions as the refund.

(v)You must keep following records:-

the name and addresses of those customers you intend to reimburse;

the total amount of money paid to each customer;

the amount of interest, if applicable, paid to each customer; and

the date the money was refunded.

Who are my customers?

Your customer - called a “consumer” in the regulations - is the person who paid for the insurance cover, and is usually the insured or the policyholder (or both).

How soon after the undertaking has been signed should repayments be made?

We would normally expect you to have the scheme ready to implement when we receive your signed undertaking and to have begun contacting customers straight away, rather than waiting until well into the 90 day period before doing this. A late start to refunding the money without good cause will not be seen as a valid reason for extending the 90 days refund limit.

Statutory interest

Where the sums being reimbursed were overpaid because of an error by Customs, statutory interest will be paid. Any statutory interest paid under this scheme is subject to the same terms and conditions as any other money returned under the scheme and must be refunded to consumers. This is because it is the consumer who did not have use of the money, not the claimant who collected it from them to pay to Customs. Attached to this note is a list of interest rates used by Customs to calculate statutory interest. Interest is calculated on a simple, rather than compound, basis.

Any statutory interest must be refunded in full, any residue must be returned to Customs within the specified time limit of 14 days.

If you have problems working out how much interest is due to your customers, your Local Insurance Premium Tax Officer (LIPTO) office will be happy to provide a print out of the statutory interest calculation, which shows interest on a period by period basis. You will then be able to divide interest payable for a particular period into the amount overpaid for the same period. This should determine approximately what is due to consumers for a particular period.

Checks

To ensure that you are refunding the consumers in the agreed manner, we will ask to see your “scheme” records. We will give written notice of our intention to see these records.

The costs of administering the scheme

Any costs you incur in administering the scheme must not be taken out of the refunds. If you do we will assess for its return.